Private v public sector pay

Almost every attack on public sector pensions makes much of the difference between average public and private sector pay. And attacks on the public sector from the shrink-the-state right such as the TaxPayers’ Alliance are full of accusations of public sector feather-bedding (though a few Saturday nights working in an A&E department or behind the counter at a Job Centre Plus would be a good development opportunity for TPA staff). In my commentary on Digby Jones’ recent remarks I promised to look in a bit more detail at private and public sector pay trends. So here goes.

However you look at the top-line statistics, pay tends to be higher in the public sector than the private sector. According to ASHE in 2008 full time workers in the public sector had a mean weekly wage of £582 and a median of £523, while in the private sector the mean was £574 and the median was £460. But as Polly Toynbee argues it’s more complicated than that. (I’m looking at full time weekly earnings as ONS were able to give me these figures going back to 1984 – the hourly wage would of course be a better comparative figure as it would include part-timers and thus many more women.)

The obvious point is that the public sector workforce is more skilled and has more professional workers in it than the private sector workforce. Such jobs command higher pay. It is not surprising therefore that average pay is higher in the public sector.

But those attacking the public sector seem to think there is something new about this.

This is why I asked the very helpful people at ONS for a historic data set comparing public and private sector pay.

If we compare the median full time weekly wage in public and private sectors the median has been higher in the public sector every year since 1984. More of these years were under Conservative than Labour governments. The graph hardly shows a steady increase but rather periodic falls as the public sector holds down wages and then has a rapid catch up. It’s a pity we can’t see figures for earlier than 1984 as the starting date does clearly make a big difference. This would have been a very different graph is we had started in 1990. (Health warning: this graph combines figures from the New Earnings Survey (to 96) and ASHE (from 97) – and there were also changes in ASHE methodology in some years. The figures for public sector mean pay show the private sector in front in some years and behind in others, but there look to me to be some problems with the earlier data so I’ve not charted these, even though they make the case more strongly. )

The gap between median full time pay in public and private sectors

But although it’s not smooth, the trend is upwards – though with tough public sector pay deals bringing the gap down in recent years.

This does not mean however that public sector workers as individuals have necessarily been getting pay rises higher than the private sector when the graph shows an increase in the gap.

This is because the make-up of the public sector workforce has changed over time. Lower-skilled and lower-paid jobs have been moved from the public to the private sector through contracting out and privatisation. Median pay is the pay of the worker in the middle of the distribution. Half the workforce earns more – and half less. But if you take out people from the bottom half the mid point moves to a higher paid worker, even if no-one gets a pay rise.

The only real way to compare public sector and private sector pay is too look at whether people doing the same jobs in the different sectors get paid more or less than each other. Do nurses in private hospitals get paid more or less than doctors in NHS hospitals? Do teachers in public schools get paid more or less than teachers in state schools? In practice of course it is more complicated than that as jobs are not always comparable. As Polly Toynbee says:

You can’t average out the two sectors because there are five times more unskilled workers in the private sector – most manual jobs have been contracted out from the public sector. The state sector is far more highly skilled: ONS figures show only 8.6% of people in the private sector are in professional grades, against nearly a quarter in the public sector. Comparing grade for grade, they are paid 70p an hour less for working for the state.

Written by Nigel Stanley

I was the TUC’s Head of Campaigns and Communications until semi-retiring in May 2015, I started at the TUC in 1994.

My interests cover a wide range of communications and politics related issues, but if I have a specialist subject, itR…